Emergent Research

EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

Authors

The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

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Emergent Research works with corporate, government and non-profit clients. When we reference organizations that have provided us funding in the last year we will note it.
If we mention a product or service that we received for free or other considerations, we will note it.

But the HBR article expands on a topic we haven't covered in-depth. This is as the use of skilled external talent increases, so does the need for more efficient ways to find, hire, and manage contingent workers as well as integrate them into a company’s teams.

We believe corporate external talent platforms — platforms that directly connect external talent with internal projects and teams — are emerging as the leading method for accomplishing these tasks.

Key quote from the article:

Blended, constantly shifting teams of internal and external talent are increasingly the norm as corporations tap skilled workers to help them become more innovative and react more quickly to changing markets and competition. We believe the release of PwC’s Talent Exchange to be a watershed moment in terms of how skilled external talent is used at major corporations.

We expect to see many more corporations follow in the path PwC and The Washington Post and embrace external talent platforms in the next 2-3 years.

This will, of course, create new opportunities for skilled independent workers.

We've long used the beer industry as an example of how industry structures are becoming more barbell like.

In almost every industry we track we see consolidation resulting in fewer, but much larger, global corporate giants. At the same time, in most industries we are also seeing growing numbers of small businesses and declining numbers of mid-sized businesses. This is resulting is industry structures that take the shape of a barbell in terms of market shares.

We used the beer industry as the main example in our 2008 New Artisan Economy report on how changing industry structures is leading to more small businesses.

The beer industry is an extreme example. Craft brewers control 21% and pretty much the rest of the U.S. market is controlled by 2 giant, global beverage conglomerates - mid sized brewers are pretty much non-existent

But the shift to barbell industry structures is both widespread and accelerating.

... a new economic landscape is beginning to emerge in which a relatively few large, concentrated players will provide infrastructure, platforms, and services that support many fragmented, niche players. In this way, both large players and small will coexist and reinforce each other.

Because it's a bit esoteric, the shift to barbell industrial structures doesn't get a lot of attention.

But it's one of the most important trends we follow and it's creating new opportunities for small businesses and independent workers.

March 28, 2016

I had the opportunity to experience Tesla's self-driving auto pilot mode in their new Model X SUV. It's very cool and the car really does drive itself.

While in auto pilot mode the human driver doesn't need to have their hands on the steering wheel or touch the pedals.

Sensors circling the Tesla coupled with front-facing radar and a camera mounted by the rearview mirror continuously scan the road. This allows the car's computer to automatically follow traffic, stay in its lane and even change lanes.

The auto-pilot is impressive, but it's is not close to perfect.

Even on a short drive there were several cases where it emitted a warning beep requesting help from the human driver. The main areas where the system seems to fail are places where lanes are not well marked or shift in a major way.

For example, the system was clearly confused by a tunnel where the pavement and line markers changed that also required a merge. It also asked for help while crossing a bridge.

So the human driver still needs to be alert and ready to take over. But all in all it's very effective and no doubt makes driving more relaxing.

The systems shortcomings point out a major problem for self-driving cars. Driving is very complex and developing a self-driving car that knows how to handle every possible driving situation is an enormous challenge.

Researchers at MIT think one way to solve this is to develop underground roadways for autonomous delivery vehicles.

For deliveries, subterranean drones have a number of advantages over unmanned aerial vehicles, said Sertac Karaman, an assistant professor of aeronautics and astronautics and one of the developers of the robotic trike. For one, a lot of urban infrastructure–from sewers and subways to conduits for telephone, data and electrical cables–already resides underground. And then there’s the safety issue: “It only takes a kid with a rock to take down a drone ..."

The other huge advantage is an underground system would be controlled environment. This would make it much easier to create the systems needed to make the delivery vehicles autonomous.

Autonomous cars are going to happen in the future and Tesla's autopilot provides a glimpse at what it will look like and highlights how good the technology has become.

But in our opinion mainstream use of fully self-driving vehicles is still many years away.

Part of this is due to cost and infrastructure. It will simply take a lot time to replace our existing fleet of traditional cars, especially given the self-driving versions will initially be much more expensive.

Also hindering the growth of self-driving cars will be regulatory and insurance issues.

We expect to see Tesla like autopilots become common in new cars over the next few years. We also expect to see fully autonomous vehicles more widely used in controlled settings.

But despite all the press reports claiming self-driving cars are just a few years away, don't expect your Uber to be driverless anytime soon.

The first is all 4 quadrants assume the growing use of contingent labor.

But contingent labor is especially more important as work becomes more democratized and empowered by technology. Since it seems likely more and more work will become more democratized and powered by technology, it seems likely contingent talent will become more important.

The second is their point that all 4 types of work will continue to be prevalent in most organizations.

This is a very important point. There's way too much hype around the gig economy taking over the economy and traditional jobs disappearing.

Key quote on this from the article:

All four quadrants will be a part of the work ecosystem for at least the next 10 years, with organizations moving from one to another depending on the strength and timing of the five forces and their effect on the organization.

So while we believe contingent talent will become more important, most Americans will continue to have traditional jobs at least for the next decade or so, and maybe even longer.

March 22, 2016

One of the most persistent myths about the Internet is that it's eliminating the need for middlemen.

Since the early days of the Internet when Bill Gates wrote in his book The Road Ahead that the "information superhighway" would become the "ultimate go-between" and that "only the humans involved in a transaction will be the actual buyer and seller" there's been a constant theme that middlemen are finished.

Things haven't exactly turned out that way.

In fact, some of the most successful and most highly valued tech startups are middlemen.

Examples include Uber, Airbnb, eBay and Etsy - all of which provide classic middlemen functions.

And, of course, the many online work intermediation platforms such as Upwork, Fiverr, Task Rabbit, Work Market, etc. are middlemen.

Even more interesting is these work intermediation platforms are spawning a second layer of middlemen.

Agencies are typically groups of around three to ten workers with similar skills and backgrounds. They are independent of Upwork, but the website accommodates their presence by allowing common agency members to reveal their affiliation on their profile page and to display the pooled feedback scores of all current and past agency members. Employers can observe these agency-level feedback scores, even for new agency members who have yet to be employed on the website and have not earned any individual feedback scores.

In other words, the agencies allow their members to show strong profile scores, even if an individual member is new and hasn't built up a solid score. This increases the likelihood that an employer will hire members of the agency.

The main reason most of the Internet middlemen are thriving is because of the need for trust. Because most buyers and sellers have few interactions, it's hard to develop trust. intermediary platforms provide a variety of methods for increasing the trust levels between buyers and sellers.

But middlemen will continue to flourish for a variety of other reasons.

I recently read the book The Middleman Economy and it dives deep on how middlemen add value in today's economy. It lays out six value added roles middlemen play. Most of these are at least somewhat related to adding trust to transactions.

This is part of a broader trend of fewer Americans in general seeing themselves as middle class. In 2014 we reported on a Pew study showing only 44% of Americans consider themselves middle class, down from 53% in 2008. So it's not just millennials.

But the quick summary is stagnant wages, increasing costs for housing, healthcare and education and the hollowing out of middle wage jobs.

These factors are making people very nervous and even scared about the future. Key quote from the Guardian article from a millennial who's very nervous:

“I’m definitely scared, mostly because I’m paying so much for myself and for my student loans, so I can’t put that money into a nest egg,” she said. “How will I ever be able to put down money for a house? How will I be able to afford a wedding?”

This quote points out one other trend of note - weddings have become way too big a deal and way too expensive.

But I digress.

But since I'm digressing I'd like to point out that the General Social Survey is an excellent source of attitudinal trend data on Americans.

Run by the NORC project at the University of Chicago, it's been conducted every two years since 1972. We refer to it often and our managing partner even worked on the GSS at one point.

Back to economic uncertainty. We believe it's one of the most important trends impacting business and society.

March 17, 2016

JWT's Intelligence's Gen Z goes beyond gender binaries covers research showing that today's teens (Gen Z) are more open-minded than older generations when it comes to issues of gender and sexuality.

Key quote on the growing view by teens that gender is not binary nor fixed:

Fifty-six percent of 13-to-20-year-olds said that they knew someone who went by gender neutral pronouns such as “they,” “them,” or “ze,” compared to 43 percent of people aged 28 to 34 years old. Over a third of Gen Z respondents also strongly agreed that gender did not define a person as much as it used to.

The study also found that Gen Z is flexible in terms of sexuality. Only 48 percent of Gen Zs identify as exclusively heterosexual and about one third indicated that they were bisexual to some degree.

This is substantially different than millennials, 65% of which reported being exclusively heterosexual. BTW, other studies have shown over 90% of baby boomers report being heterosexual. So there's clearly a generational trend going on.

The shifting view of gender is happening in part because the Internet makes it much easier for people to learn about and explore gender alternatives. Key quote from a Broadly article on the study:

"I think the internet plays the greatest role in the self-discovery process today," they said. "Young people have more access to information and to other people than ever before. Marginalized folks are building communities and platforms online and are talking about their everyday experiences on public forums. I can't tell you how many times someone has written something and I think, Oh my God, that's a real thing? That's not just me? There's a name for this?"

Now that there are terms to describe varying identities, more and more people are realizing they fit into another box or no box at all.

Below is a slide (click to enlarge) from the JWT article listing most of the terms in use to describe non-binary gender alternatives.

The shifting view of gender is an important social trend that will impact the economy in multiple ways. JWT, for example, is studying it because of its impact on shopping.

Only only 44 percent of teens said they always bought clothes designed for their own gender, versus 54 percent of millennials. I won't bother looking up the data for baby boomers, I'm confident that generation is mostly buying gender specific clothes.

But shopping is not the only area that will be impacted. Gender and gender identities are woven into much of our society. Changes in how gender is viewed will have a wide range of effects.

It claims that "soaring flows of data and information now generate more economic value than the global goods trade."

That's a pretty stunning statement, but not the one that got us to go "wow".

What got us to go "wow" is their view of the growing role small businesses are playing global trade. Key "wow" producing quote:

... the share of exports by large multinational corporations dropped from 84 percent in 1977 to 50 percent in 2013. Companies with fewer than 500 employees accounted for 97.8 percent of all identified US exporters and 97.2 percent of all identified US importers in 2011. The number of US exporting entities with fewer than 50 employees, in particular, has grown more rapidly than firms with 50 to 500 employees.

The reason for this explosive growth in small business globalization is, of course, the Internet. Key quote:

Small businesses worldwide are becoming “micro-multinationals” by using digital platforms such as eBay, Amazon, Facebook, and Alibaba to connect with customers and suppliers in other countries.

The other side of this is global customers are increasingly buying things from companies not located in their home countries.

Americans are pessimistic about the economy because, for many of them, the economy hasn’t gotten better. Unemployment is down, but incomes are flat. Millions of Americans left the labor force in the recession and haven’t returned. Millions more are stuck in low-wage jobs or are working part time because they can't find full-time work.

The article goes on to say this is why Sanders and Trump are doing so well.

So what's this got to do with the gig economy?

Much like the appeal of Trump and Sanders, the growing interest in working in the gig economy is driven by economic fear and uncertainty - and the very real need by many to supplement their income with part-time gig work.

March 10, 2016

A nuanced investigation into the sexual, economic, and emotional lives of women in America. In a provocative, groundbreaking work, National Magazine Award finalist Rebecca Traister, “the most brilliant voice on feminism in the country” (Anne Lamott), traces the history of unmarried and late-married women in Amerca who, through social, political, and economic means, have radically shaped our nation.

The key statistic on this trend, at least in our opinion, is:

Today, only around 20 percent of Americans ages 18–29 are wed, compared to nearly 60 percent in 1960.

The article and book also point out "that In 2009, the proportion of American women who were married dropped below 50 percent. In other words, for the first time in American history, single women (including those who were never married, widowed, divorced, or separated) outnumbered married women."

I'd also like to point out an important fact missing from the article.

The proportion of American men who are married has also fallen. And it's fallen at about the same rate as for women.

But I digress.

The article and book provide an interesting view on why this shift is happening with a strong focus on what it means for women.

I have to say I don't always agree with the author's point of view.

For example, although I agree today's school schedules are not family or women friendly, they were not originally designed to subjugate women as the article states. Most school schedules were originally designed so kids could help out on the farm and with other family work.